SEATTLE POST-INTELLIGENCER EDITORIAL BOARD

Published 10:00 pm, Monday, September 15, 2008

The federal government faced reality: It can't rescue every troubled financial interest. Drawing the line had to be done eventually, so it's better the Bush administration chose to do so sooner rather than later.

Treasury Secretary Henry Paulson and other officials are, to be sure, following a complicated strategy that includes easier access to loan guarantees, a close watch on interest rates and increased regulation of a system whose problems stem from deregulation run wild. The best outcome would be if they can still manage to keep the economy on some sort of growth track for the coming months while they set the stage for a broader recovery.

Even after refusing a rescue of Lehman Brothers, Paulson will find other companies eager to cross the line he has just drawn. A major insurance company is in trouble, and auto companies are renewing pleas for help.

Detroit will argue that Paulson's line doesn't really apply to the automakers, because they don't want a bailout, just loans, perhaps up to $50 billion. And even if the line does apply, well, the federal government is still obligated to help because of the requirements approved last year for higher-mileage vehicle fleets (in which Congress did promise some help with adjustments).

Of course, Detroit is facing the need to update its offerings at this particularly difficult juncture precisely because it managed for decades to wheedle its way out of government mandates for reasonable fuel economy. No one promised raising the bar or drawing a line would be any easier than, say, updating and reimposing the kind of regulations that for so long prevented financial crises.